The reality of how people eat has evolved over the centuries, and an enormous shift occurred in the last couple of years in particular. The pandemic, with its physical-distancing requirements and the new work-from-home setup, has significantly expanded the food delivery app market. Now, the sector is expected to reach $320 billion by 2029.
Moreover, the United States is the second most successful food delivery market judging by revenue. It is preceded only by China. With such lucrative numbers, it is no surprise that more and more entrepreneurs are considering food delivery app development as their next business venture.
However, developing a mobile application is no easy feat. So, if you’re interested in building a delivery app like UberEats or DoorDash — first read this article! Below, you will discover:
- Trends affecting the food delivery app industry
- Must-have elements of a successful application
- Popular food app monetization models
- How to make a competitor-beating delivery app
Let’s get right into today’s subject!
First, let’s take a look at some of the main trends that are affecting the industry. It’ll be a good idea to keep these in mind as you start to think seriously about your food delivery app business model.
Unsurprisingly, geographic coverage is one of the main points of competition among delivery platforms. In central locations, the market is quite saturated and, as a result, providers have to fight tooth and nail for each customer, restaurant, and delivery driver within the area.
As you can imagine, players who have entered the market first have the advantage of solidifying their position, but that doesn’t always mean there is no room for a new entrant. Disruptors can spring up in the most unlikely places as long as business owners take the time to think about how they might differentiate. So, just keep geographic competition in mind when you’re planning the development of your delivery application.
Changes to Commission Rates
Changes to commission rates are also expected to have an impact on the food delivery ecosystem. We’ll be talking about commissions in more detail later, but essentially charging the restaurant a percentage of the ordered meal price is one of the primary ways that app owners make money.
However, these commission rates are frequent topics of discussion within the industry, especially following the pandemic when some local and state US governments imposed limits on the commissions app platforms could charge restaurants.
So, depending on the city and state you’d like to operate in, you might have to face commission caps or other limitations that impact your business model. Since these debates are set to continue and consequences will likely vary across regions, it’s important to keep an eye on the legislative developments that are relevant to you.
Another well-discussed issue within the sector is driver compensation and benefits. As you may know, many food delivery providers like the flexibility of the gig economy that allows them to hire drivers on-demand depending on busyness.
However, the Department of Labor is seriously considering reclassifying third-party delivery drivers as employees which would definitely have a major impact on the costs of operations for companies. Primarily because hiring a driver as an independent contractor doesn’t require organizations to offer the typical benefits. Yet, with the reclassification, drivers could be considered as employees and thus obliged to receive minimum wage and employment benefits.
Once again, it’s important to keep your hand on the pulse in this regard and consider what kind of a business model you’ll have to develop to ensure profitability.
Finally, there is no denying the impact that social media platforms have on every industry, and the food delivery sector is no exception. As such, it is crucial for companies to know how to capitalize on the opportunities that different social media platforms offer.
For instance, just two years ago, Instagram launched a new function that allows users to place food orders via the restaurant’s Instagram profile or Stories. As you can imagine, this eliminates some of the extra steps customers may need to take when ordering from a particular restaurant and instead simply order through the app that they’re already on.
The opportunity for food delivery app providers here lies within the ability to be listed as eligible partners by Instagram. Since restaurant owners will need to first create an account with an appropriate food delivery partner, offering support for this kind of functionality is crucial to stay competitive in the market.
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Now that we’ve discussed some of the main trends food ordering app providers should be aware of, it’s time to slowly dive deeper into the development subject. So, we’ll take a look at the three key elements that on-demand apps for food delivery ought to have — customer, restaurant, and courier-facing portals.
It’s important to know that there is a fourth, albeit less visible, panel that is crucial for this kind of platform, and it is the admin-facing one. However, we won’t go into too much detail on it as it essentially provides the food delivery app company administrators with access to the entire system so that they can resolve issues and carry out admin tasks seamlessly. Instead, let’s cover the three most user-facing panels.
Overall, this part of the food delivery application should comprise of the following features:
- Account creation, including via third-party apps like Google or Facebook
- Restaurant listings with search filters
- Payment gateway integration for processing purchases and tip couriers
- Order tracking, including GPS-powered courier location and ETA monitoring
- Chat with restaurant and courier
- Ability to save favorites
- History of orders
- Push notifications
- Ability to rate and review
Of course, these are some of the most common and pretty non-negotiable functions that you’ll want to include when you make a food delivery app. However, don’t forget to put on your creativity hat and think which features you could implement that would help your platform differentiate from others on the market.
Now, the merchant-side of the app should be focused on swiftly notifying the partner restaurants about placed orders and connecting them with an available courier. The non-exhaustive list of features here includes:
- Restaurant signup ability
- Content management tools for uploading photos, menus, descriptions, etc.
- Push notifications
- Order tracking that allows for constant order status monitoring
- Accounting system integrations
- Promotion launch functions
- Nearest courier locator
- Online chats with couriers and customers
- Analytical tools for restaurateurs to learn about their online customers
Finally, the courier-facing side of the app needs to inform drivers of available orders, provide GPS navigation, and essentially help them get from point A to point B with minimal issues. As such, this part of the food delivery app needs to have:
- Registration and profile creation ability
- Order management function to check order details, accept or reject delivery requests, etc.
- GPS navigation
- History of delivered orders
- Push notifications
- Chat with customer and restaurant feature
- Cashout functionality
As you can see, you’ve got to think about three distinct elements of a food delivery app when embarking on your development journey. At the end of the day, all three need to work together smoothly so that the best possible user experience is ensured.
Are you ready to talk about money? Because it is time to dive into the subject of monetization. You see, there are several ways for a food delivery app owner to make money and typically, you’ll use a combination (or all) of the four we outline below.
Delivery charges are one of the primary ways for app providers to make money. Of course, this only applies to those whose business model includes taking care of both – orders and deliveries, like UberEats or DoorDash do. We’ll talk more about the implications of each of these two options later.
In essence, this simply involves charging the customer for the delivery of their food. Some platforms opt for a fixed rate while others make it vary depending on the distance the driver will have to cover.
Delivery charges are great when it comes to creating a consistent income stream, but they are rarely enough to sustain a business. Hence, most successful delivery services combine this monetization strategy with others.
Another frequently used strategy for delivery app monetization involves charging restaurants commissions on each order placed via your platform. Popular market players like DoorDash, tend to charge up to 30% in commissions. As you can imagine, this leads to quite a sizable chunk of income.
However, as we mentioned above, there are many discussions about limiting commissions occurring at the policy level in the U.S. So, definitely don’t forget to continuously monitor the topic.
Some delivery app business owners also incorporate advertisements into their platform for additional income. In this case, restaurants are offered the opportunity to pay to be listed at the top of the search results or be on the “featured” list. Thus, helping attract more customers.
However, as a food delivery app owner, it’s important not to let everyone run ads as they please because it can lead to chaos and restaurants with subpar customer feedback making it to the top. As you can imagine, this could frustrate users and cause them to flock to other providers. So, make sure to only allow the running of ads to venues that have good reviews and won’t put a negative stain on your organization.
Finally, you can also consider implementing subscriptions to get extra money while offering more flexibility to your users. In short, subscriptions allow users to pay a fixed monthly fee and get unlimited free deliveries from eligible restaurants on orders over a certain amount.
Users who place orders frequently might appreciate this option while you capitalize on a consistent and predictable revenue stream that encourages larger order amounts. Thus, boosting your income from commissions as well.
We’ve already covered a lot of ground, but there is a part of the topic that is still to be discussed. Let’s talk about the process of food delivery app development so that you can be better prepared when starting the project for your company.
It’s important to point out that when you develop a food delivery app, the sequence of events may differ on a case-by-case basis. For instance, the process will vary somewhat depending on whether you choose to outsource development or hire an in-house team, the business model you opt for, and other factors. Similarly, food delivery app development cost will also be different depending on the features you choose to implement.
Hence, we’re going to look at the steps business leaders may undertake from a more broad perspective. Yet, it will certainly provide you with an idea on where and how to get started.
1. Perform Market Research
Everything begins with market research and analysis. After all, how can you determine your app’s positioning and key points of differentiation without knowing what is already popular among consumers.
So, take a look at what the best players in the field are doing and think about how you could stand out. Perhaps, you have an innovative business model idea or you have a network of restaurateurs who would sign exclusive partnerships with your company?
Overall, as you perform your research, don’t forget to take note of:
- What are the best practices existing delivery platforms follow
- Who is your target market and what are their pain points
- Industry trends that might impact your decision-making
- How will your food delivery app differentiate from others
- What are the objectives you want to accomplish
By taking your time with this part of the food delivery app development process, you’ll set yourself up for success and avoid issues down the line.
2. Select a Business Model
Selecting a business model will likely be a natural byproduct of your research, but it’s important to discuss the two typical options that are available for food delivery app creators. You can either go for an order-only business model or an order and delivery one. Let’s quickly discuss the pros and cons of each.
The order-only business model implies that your platform will only manage orders but not actually carry out deliveries. Eat24 and JustEat are the best examples of this approach.
The good thing with the order-only strategy is that it has low barriers for entry since you don’t need to assemble a team of couriers for delivery. Instead, you just serve as an intermediary between the restaurant and the customer. However, this sector is already quite saturated with competitors.
Order and Delivery
On the other hand, the order and delivery model implies that your platform takes care of processing orders and getting them to customers. Here, you might need to cooperate with courier services or assemble your own team of delivery drivers.
Hence, a lot more management and coordination is required for this kind of business model. However, you retain control and can think of creative ways to make your platform differentiate.
3. Outline the Key Delivery App Features
Next, you need to outline the main features your solution should possess. We’ve talked about the must-have functionality of each side of the application a few sections above, but here it’s also a good idea to think about your app as a whole.
For example, will it have some kind of a loyalty program? Or, does it need to integrate with other software? In short, think about all of the features you’d like for it to have so that the user experience it delivers is unmatched.
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4. Select the Tech Stack
Now that you’ve selected your business model and outlined the features of the food delivery application, it’s time to select the technology stack. Of course, your app development team will take the lead on this and ensure that the optimal technologies are chosen for your project.
Either way, we’ve assembled an overview of tech stack essentials here for you to quickly skim through:
- Backend technologies: Backendless, Back4App, Firebase, AWS, GCP, Azure Cloud Technologies
- Frontend technologies: Flutter, Swift, Kotlin, React Native
- POS systems: FourSquare, Clover, ToastTab, Lightspeed
- Payment gateways: Stripe, Braintree, Apple and Google Payments
- User location: Google Maps SDK, TomTom, Apple MapKit, HERE, Facebook Places
- Push notifications: Firebase Cloud Messaging, APNs and FCM
5. Develop a Delivery App MVP
Once the tech stack is settled, it’s time to get started with development. Specifically, you may want to first build an MVP application and then iteratively build on it to expand the functionality.
Broadly speaking, the mobile app development process will include the following:
- Business analysis to solidify the project requirements
- UI/UX design to ensure usability and engagement
- Backend development to facilitate good performance
- Frontend development to create an interactive user-facing side
- App testing to make sure everything works smoothly
Once you’ve gone through all of the development stages and got rid of issues or bugs, you can proceed to release the food delivery app to the market.
6. Product Release
Finally, it’s time to release your food delivery app into the world and promote it. Of course, it’s better to plan and start your promotion efforts prior to the actual product release, but once the solution is out on the market you will certainly have to monitor how it does and potentially adjust your marketing and PR strategies.
Overall, you may want to consider collaborating with influencers, launching social media campaigns, working together with the restaurants listed on your platform to attract more attention, and so on. At this point, you will be focusing on connecting with your target market and growing the user base by catering to their needs and incorporating feedback into future app version releases.
7. Continuous Development
The modern world moves at lightning speed and so does technology. Hence, it’s imperative for all of your systems to be up-to-date and function in the most efficient manner possible. To ensure this, you’ve got to continuously maintain, support, and adapt your food delivery app.
As such, the development process never quite ends, especially when your entire product is a software solution. Chances are, you’ll want to implement new features as the industry develops and innovations come to market. Moreover, you’ll need to continuously promote the platform for it to remain top of mind for users. So, don’t forget to account for these aspects in your planning because this kind of project does require long-term commitment.
Revolutionize the Food Delivery Market
As you can see, there is plenty to keep in mind when you want to start a delivery service app. From the key trends impacting the sector to the various monetization methods — there is a lot for business leaders to consider prior to starting the development process.
However, if you need help with this kind of initiative — don’t hesitate to reach out to our team! Velvetech’s specialists have spent years delivering top-notch custom mobile applications that delight users and generate revenue for businesses. We’d be happy to participate in your next project and make sure it is a success.
Building a customized food delivery app can be overwhelming, but with Velvetech’s extensive development services, it won’t have to be. So, simply fill out the form below and we will get back to you shortly.